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Pairing Catastrophic Health Insurance with a Health Care Spending Account 

By: Benefits by Design | Tuesday May 30, 2023

Updated : Monday July 24, 2023

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[Free download: Infosheet – Catastrophic Health in Action] 

Catastrophic Health Insurance is one of the many different options available within the group insurance umbrella of Extended Health Care (EHC). While it may not be suitable for all companies, it can provide some cost savings for employers.  

And when we analyzed our online employee benefits assessment results, we found that many employers with no previous benefits experience were indeed searching for just this type of solution.  

Determining Canada’s Most Sought After Group Benefits

The Basics of Catastrophic Health Insurance 

Catastrophic Health Insurance was created so that employers could provide coverage to their employees for catastrophic medical events – such as high-cost medications, a private duty nurse, or emergency dental care.  

The plan is set up with a high deductible – BBD’s is commonly $1,000 – so that employees whose medical expenses throughout the year are nominal will not surpass that amount. Therefore, their medical expenses would come out of pocket. Only if the expenses are so great that they exceed the $1,000 deductible does the plan then start paying.  

Catastrophic Health plans also do not provide coverage for some of the smaller medical expenses, such as paramedical services, vision care, or stump socks. This allows the premiums to be much lower than traditional EHC coverage. 

This also means employees are responsible for smaller, day-to-day medical expenses, but if they end up requiring a more expensive procedure, medication, or medical equipment, they have a safety net. After the first eligible $1,000 out-of-pocket is applied to the deductible, they start receiving 100% coverage. 

It is important for plan members to submit their eligible medical expenses to their plan, even if they are not reimbursed, as this will go towards satisfying the deductible.  

Does Catastrophic Insurance Make Sense for My Employee Benefits Plan?

Pairing Catastrophic Health Insurance with a Health Care Spending Account 

Some employers also want to provide coverage for the day-to-day expenses. In this case, they can pair their Catastrophic Health Insurance coverage with a Health Care Spending Account (HCSA), one that is often the same amount as the deductible.  

Why would employers do this instead of simply providing EHC coverage? Because the Catastrophic Health Insurance premiums are much lower than traditional EHC premiums. And adding the spending account allows employers to control the cost, while giving their employees flexible coverage for medical expenses. 

Catastrophic Health Insurance In Action – Single Coverage 

Let’s take a look at the Catastrophic Health plan through the eyes of an employee: James. 

James: 

• Single coverage 
• Single deductible: $1,000 
• HCSA balance: $1,000 

James at the pharmacy – 1^st Visit: 

James has his first prescription refill for the year, which costs $650. He presents his GSC ID number to the pharmacist. The claim is auto-submitted to James’ HCSA by the pharmacy. Since his deductible has not yet been satisfied, he pays the pharmacy $650 out-of-pocket. Since he has available HCSA funds, James receives reimbursement for the $650 through direct deposit. Prescription drugs go towards satisfying the deductible, which means James now has a deductible balance of $350. He also has a balance of $350 remaining in his HCSA. 

James at the pharmacy – 2^nd Visit: 

James needs his second refill of the year of $650. Since there is a deductible of $350 still owing, James pays $350 out of pocket at the pharmacy. With this prescription and payment, he has satisfied the $1,000 deductible. The remaining $300 will be covered for him by the plan automatically at the pharmacy. The initial $350 that James paid is auto-submitted to James’ HCSA by the pharmacy. As he has $350 left in his HCSA, he receives reimbursement for the full $350 he paid at the pharmacy. There is no deductible left owing and the HCSA balance is now $0. 

Ongoing Visits: 

Now when James goes to fill his prescription or any new eligible prescription, he has 100% coverage for the remainder of the calendar year. When he fills his third prescription for the year, James has no deductible and receives coverage for the claim directly at the pharmacy 

Catastrophic Health Insurance In Action – Family Coverage 

Let’s take a look at the Catastrophic Health plan through the eyes of another employee: Eric. 

Eric: 

• Family coverage 
• Plan member deductible: $1,000 
• Spouse and dependents deductible: $1,000 
• HCSA balance: $1,000 

Eric’s wife and kids at the pharmacy – 1st Visit: 

Eric’s wife received a new ongoing prescription that costs $450. Their child also has a onetime antibiotic medication that costs $110. Eric’s wife presents his GSC ID number to the pharmacist. They pay $560 out-of-pocket at the pharmacy for the prescriptions. The claims are auto-submitted to Eric’s HCSA by the pharmacy. Since he has available HCSA funds, Eric receives reimbursement for the $560 through direct deposit. $440 remains to satisfy the family deductible, and $440 remains in Eric’s HCSA. 

Eric’s wife and kids at the pharmacy – 2^nd Visit: 

Eric’s wife needs a refill of her prescription for $450. Since there is a deductible still owing, she pays $440 out-of-pocket at the pharmacy. With this prescription and payment, the combined dependent deductible of $1000 has been satisfied. The remaining $10 owed will be covered for her directly at the pharmacy. The initial $440 that Eric’s wife paid is auto-submitted to Eric’s HCSA by the pharmacy. As he has $440 available HCSA funds, they receive reimbursement for the full $440 through direct deposit. There is no deductible left owing for the dependents, and the HCSA balance is now $0. 

Ongoing Visits 

Now when any of Eric’s dependents need to make a catastrophic health claim, they have 100% coverage for the remainder of the calendar year because they have satisfied the spousal/dependent deductible of $1,000. Eric has not satisfied his deductible, therefore the first $1,000 of medical expenses will be out of pocket for him. However, he must still submit them under his GSC plan in order for the expense to count towards his deductible 

Catastrophic Health In Action -Single and Family Coverage

Download the Infosheet (PDF: 89KB)

Catastrophic Health Insurance In Action – Spousal Coverage 

Let’s take a look at the Catastrophic Health plan through the eyes of an employee: James. 

James: 

• Spousal coverage 
• Family deductible: $2,000 

• HCSA balance: $1,000 

James at the pharmacy with spousal coverage – 1^st Visit: 

James has his first prescription refill for the year costing $650. He presents his Green Shield Canada (GSC) ID card and the pharmacist submits through James’ plan first and the claim is declined with a message indicating: “Deductible not yet met, eligible for HCSA”. The good news is that his spouse has benefit coverage through their workplace plan.  

On his Green Shield Canada (GSC) Everywhere online access, James has turned off the auto-coordination option for his HCSA coverage since he has coverage under his spouse’s benefits plan. With James’ auto-coordination turned off and the deductible not yet met, the claim is declined. Since James’ spouse has prescription coverage at 80% through their benefit plan, the claim is paid out at $520. This leaves James out of pocket for $130 at the pharmacy.  

Prior to leaving the pharmacy, James loads up his GSC Everywhere mobile app and submits his $130 out of pocket expense through his HCSA. Since James turned off auto-coordination, he was able to submit his claim through his spouse’s plan. The remaining amount not covered of $130 was submitted through his HCSA, leaving him with a balance of $870 that can be used towards future claims. In addition to the HCSA, $350 remains towards satisfying the $1,000 deductible.  

Important Note: auto coordination should be turned off for this. 

James at the pharmacy with spousal coverage – 2^nd Visit: 

James needs his second refill of the year of $650. Since there is a deductible still owing, James presents his GSC ID card and pays $350 out-of-pocket at the pharmacy. He receives a reimbursement of $300 now that James has entered 100% coverage through the Catastrophic health portion of his benefit plan by satisfying his deductible.  

Since James’s HCSA auto-coordination is still turned off, the pharmacist submits the remaining $350 to the spousal plan. Since the spousal plan covers 80% of prescription drug claims, James receives reimbursement of $280. This leaves James out of pocket for $70 at the pharmacy. Prior to leaving the pharmacy, James loads up his GSC Everywhere mobile app and submits his $70 out of pocket expense through his HCSA. The remaining amount not covered of $70 was submitted through his HCSA, leaving him with a balance of $800 that can be used towards future claims. The full amount of the prescription has been covered and there is no remaining amount left to be covered by the HCSA. 

Ongoing Visits 

James still has $800 left in his HCSA that can be used towards other medical expenses such as paramedicals, vision, dental, and more. The deductible has now been fully satisfied and any future drug claims James makes will be 100% covered by his benefit plan. 

Catastrophic Health In Action – Spousal Coverage

Download the Infosheet (PDF: 87KB)

Catastrophic Health Insurance when paired with a HCSA can be a cost-efficient way to provide a safety net to your employees, along with some degree of flexibility when it comes to the more minor medical expenses. And it can be paired with pooled benefits (Life Insurance, Accidental Death & Dismemberment, Disability Insurance, Critical Illness) as well as dental for a more well-rounded employee benefits plan. 

Find out if Catastrophic Health Insurance could be a good fit for your company

Does Catastrophic Insurance Make Sense for My Employee Benefits Plan?